Abdus Sattar Biswas v. UNION OF INDIA — 1974 DIGILAW 206 (CAL)

JUDGMENT : 1. IN these two Rules the petitioners have challenged the vires of clause (bbb) (i) of subsection (1) of section 5 of the Bengal Finance (Sales Tax) Act, 1941, hereinafter referred to as the Act, as inserted by section 2 of the West Bengal Ordinance no. XIV of 1969 since replaced by the bengal Finance (Sales Tax) (Amendment) Act, 1970, hereinafter referred to as the Amendment Act. 2. THE petitioners carries on business as rearers of silk yarns and reelers of raw silk thread from cocoons which are silky cases spun by Larva of silk yarns and do not involve any twisting operation. The Governor of West bengal in exercise of the powers conferred by clause (1) of Article 213 of the Constitution of India promulgated the said Ordinance on October 16, 1969 which came into force on and from november 15, 1969. By the said ordinance a new clause (bbb) (i) was inserted in sub-section (1) of section 5 of the Act. Clause (bbb) (i) is as follows: "5 (1).-The tax payable by a dealer under this Act shall be levied on his textile turnover at the rate of - (bbb) Two per centum of such part of his taxable turnover as represents sales of - (i) Yarn, other than cotton yarn. " It may be stated in this connection that yarn was tax free article and was, accordingly, included in item No. 15 of schedule 1 to the Act which is a list of tax free goods, under section 6 of the Act. By virtue of the said ordinance, excepting the cotton yarn all other yarns have been made liable to payment of sales tax. Pursuant to the insertion of clause (bbb) (i), schedule 1 has been amended and in item no. 15 thereof in place of 'yarn', 'cotton yarn' has been substituted. 3. IN Civil Rule No. 7889 (W) of 1969 the petitioners have challenged the vires of the Ordinance. During the pendency of the Rule as the Ordinance was replaced by the amendment Act the petitioners obtained the other Rule, namely, Civil Rule No. 5431 (W) of 1970 challenging the vires of clause (bbb) (i). There cannot be any doubt that after the expiry of the Ordinance and the passing of the Act, Civil Rule no. 7889 (W) of 1969 has become in-fructuous. There cannot be any doubt that after the expiry of the Ordinance and the passing of the Act, Civil Rule no. 7889 (W) of 1969 has become in-fructuous. It is not, therefore, necessary for me to consider the contentions raised in that Rule challenging the legality of the Ordinance. The only point that we are to consider is the Constitutional validity of clause (bbb) (i). 4. MR. Arun Kumar Dutt, learned advocate appearing on behalf of the petitioners has strenuously urged that the said clause (bbb) (i) having made the sales of yarn other than cotton yarn subject to the payment of Sales tax, is hit by the provisions of Article 304 (b)of the Constitution and the proviso thereto. Article 304 is as follows :- "304. Notwithstanding anything in article 301 or Article 303, the Legislature of a State may by law- (a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so however, as not to discriminate between goods so imported and goods so manufactured or produced : and (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: provided that no Bill or amendment for the purposes of clause (b)shall be introduced or moved in the legislature of a State without the previous sanction of the President. " Under Article 301, subject to the other provisions of part XIII trade, commerce intercourse throughout the territory of India shall be free. Article 302 confers power on Parliament to impose restrictions on trade, commerce and intercourse. 5. IT is contended that in view of the imposition of tax on sales of yarn, other than cotton yarn the freedom of the petitioners in carrying on their said trade and business has been greatly affected. It is said that the imposition of sales tax on all kinds of yarn excepting cotton yarn, puts restrictions on the freedom of trade, commerce or intercourse and that such restriction is not a reasonable restriction. Secondly, it is contended that no sanction of the President of India having been obtained before the introduction of the Bill relating to the amendment Act as required by the proviso to Article 304 (b), the amendment act inserting clause (bbb) (i) in the act is ultra vires. 6. Secondly, it is contended that no sanction of the President of India having been obtained before the introduction of the Bill relating to the amendment Act as required by the proviso to Article 304 (b), the amendment act inserting clause (bbb) (i) in the act is ultra vires. 6. THE conditions precedent to the application of Article 304 (b) or the proviso thereto is that the impugned law has put restrictions on the freedom of trade, commerce or intercourse. If no such restriction is imposed there is no question of application of 304 (b) or its proviso. It is, therefore, necessary to consider whether by the imposition of two per centum of tax on Sales of yarn other than cotton yarn any restriction has been put on the freedom of trade. It is not the case of the petitioners that by the introduction of clause (bbb) (i) in the Act, the free movement of the goods they produce has been affected. In this connection, I may refer to paragraph 13 of the writ petition which rum as follows :- "13 - That your petitioners apart from the payment of Sales tax on Silk Yarns, these people will be required to maintain full, true and correct account of their produces, purchases, and sales ; and submit Returns to the office of the commercial Tax Officer at a regular interval. Any delay or default on their part in the submission of the Returns, which is bound to occur due to their illiteracy and ignorance, will make them liable to pay heavy pecuniary penalty, completely eating up their profits and the very vitals of the industry. " The only consequence of the imposition of tax on sales of yarn other than cotton yarn which is apprehended to be suffered by the petitioners is their liability to pay penalty due to their default in the submission of returns on account of their illiteracy and ignorance. The allegations made in paragraph 13 are speculative and no reliance can be placed on it. Even assuming that the petitioners may suffer a heavy pecuniary penalty, as alleged, it cannot be said that it is the result of the imposition of tax. The consequence which has been alleged in paragraph 13 has no bearing with the imposition of tax under clause (bbb) (i) of the Act. Even assuming that the petitioners may suffer a heavy pecuniary penalty, as alleged, it cannot be said that it is the result of the imposition of tax. The consequence which has been alleged in paragraph 13 has no bearing with the imposition of tax under clause (bbb) (i) of the Act. It is true that by the imposition of tax on any goods produced or manufactured in course of trade and commerce restrictions can be put on the freedom of such trade and commerce but before it can be said that the freedom of trade and commerce have been restricted it must be proved that such restriction is the direct effect of taxation. The allegations made in paragraph 13 have no direct connection with the imposition of sales tax by clause (bbb) (i), but as stated already, they are speculative or in any event too remote. The said allegations have nothing to do with the free movement of trade. Reliance has been placed on behalf of the petitioners in Atiabari tea Co. Ltd., v. State Assam, (1961)1 S.C.R. 809 but in that decision Gajendara gadkar J. Who delivered the majority judgment observed as follows : ". . . . . . . . We think it would be reasonable and proper to hold that restrictions, freedom from which is guaranteed by Article 301, would be such restrictions as directly and immediately restrict and impede the free flow or movement of trade. " 7. IT was further observed by gajendra Gadkar J. as follows: - "taxes may and do amount to restrictions but it is only such taxes as directly and immediately restrict trade that would fall within the purview of Article 301. The argument that all taxes should be governed by Article 301 whether or not their impact on trade is immediate or mediate, direct or remote, adopts, in our opinion, an extreme approach which cannot be upheld. " 8. IT is clear from the aforesaid observations that imposition of taxes which does not restrict directly and immediately or impede the free flow or movement of trade or has no direct and immediate impact on trade does not come within the purview of Article 301 and, consequently, is not hit by Article 304 (b). The same view has Been expressed in Automobile Transport (Rajasthan)Ltd. v. State of Rajasthan, (1963) 1 S.C.R. 491 ; Firm A.T.B. Mehtab majid and Co. The same view has Been expressed in Automobile Transport (Rajasthan)Ltd. v. State of Rajasthan, (1963) 1 S.C.R. 491 ; Firm A.T.B. Mehtab majid and Co. v. State of Madras, A.I.R. 1963 S.C. 928 and Andhra Sugar ltd. v. state of Andhra Pradesh, A.I.R. 1968 S.C. 599. In the last mentioned case referred to above Bachawat J. has observed that normally a tax on sale of goods does not directly impede the free movement or transport of goods. All these decisions have been considered in the State of Madras v. N.K. Nataraja mudaliar, A.I.R. 1969 S.C. 147. It has been held in that case that it must be taken as settled law that the restrictions or impediments which directly or immediately impede or hamper the free flow of trade commerce and intercourse fall within the prohibition imposed by Article 301 and subject to the other provisions of the Constitution they may be regarded as void. The petitioners, therefore, have failed to make out any case that due to imposition of tax on sale of yarn other than cotton yarn the freedom of their trade have been impede or hampered as a result of the direct impact of such taxation. In these circumstances, I hold that clause (bbb) (i) of sub-section (1) of section (5) does not put any restriction on the free movement of trade, commerce or intercourse and, as such, the same does not come within the purview of article 304 (b). Consequently, the bill relating to the amendment Act by which the said clause was introduced in the Act did not require the sanction of the President of India before the same was introduced in the State legislature. It. is next contended that as the amendment Act before it was passed was a Money Bill within the meaning of clause (a) of Article 199 of the Constitution was required by the second proviso to Article 200 of the constitution to be reserved for the consideration of the President of India. An extreme contention has been made by Mr. Dutt that all Money bills are to be reserved for the consideration of the President of India. An extreme contention has been made by Mr. Dutt that all Money bills are to be reserved for the consideration of the President of India. Clause (a) of Article 199 (1) of the constitution is as follows : "199 (i)-For the purposes of this chapter, a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely : (a) the imposition, abolition, remission, alteration or regulation of any tax. " 9. THE Bill was undoubtedly a money Bill. Now the question is whether it was required to be reserved for the consideration of the President of India provided in the second proviso to article 200. Article 200 is as follows:- "200-Assent to Bills-When a Bill has been passed by the Legislative Assembly of a State or, in the case of a state having a Legislative Council, has been passed by both Houses of the legislature of the State, it shall be presented to the Governor and the governor shall declare either that he assents to the Bill or that he withholds assent there from or that he reserves the Bill for the consideration of the President. Provided that the Governor may, as soon as possible after the presentation to him of the Bill for assent, return the bill if it is not a Money Bill together with a message requesting that the house or Houses will reconsider the Bill or any specified provisions thereof and, in particular, will consider the desirability of introducing any such amendments as he may recommended in his message and, when a Bill is so returned, the House or Houses shall reconsider the Bill accordingly, and if the bill is passed again by the House,or houses with or without amendment and presented to the Governor for assent, the Governor shall not withhold assent there from : provided further that the Governor shall not assent to, but shall reserve for the consideration of the President, any Bill which in the opinion of the governor would if it became law, so derogate from the powers of the High court as to endanger the position which that Court is by this Constitution designed to fill. " 10. " 10. UNDER he second proviso the governor will have to reserve for the consideration of the President any Bill which in his opinion would, if it became law, so derogate from the powers of the High Court as to endanger the position which that Court is by the constitution designed to fill. I fail to understand how clause (bbb) (i) has any connection whatever with the powers of the High Court ; either directly or indirectly. By no stretch of imagination it can be said that the said clause has any relation to the powers of the High Courts This contention has, therefore, no substance at all. The other contention that all Money bills are to be reserved for the consideration of the President is equally untenable and without any substance. Mr. Dutt has referred to the provisions of Article 201 of the Constitution which provides as follows :- "201.-When a Bill is reserved by a governor for the consideration of the president, the President shall declare either that he assents to the Bill of that he withholds assents there from : provided that, where the Bill is not a Money Bill, the President may direct the Governor to return the Bill to the house or, as the case may be, the houses of the Legislature of the State together with such a message as is mentioned in the first proviso of Article 200 and when a Bill is so returned the House or Houses shall reconsider it accordingly within a period of six months from the date of receipt of such message and, if it is again passed by the House or Houses with or without amendment, it shall be presented again to the President for his consideration. " A Bill may be reserved for the assent of the President for various reasons as provided in the Constitution. One of the reasons is that as mentioned in the second proviso to Article 200. It does not follow either from the first paragraph of Article 201 or from the proviso thereto that all Money Bills have to be reserved for the assent of the president. If that be the position as contended by Mr. Dutt, there would not have been any necessity for the second proviso to Article 200. In my opinion, the contention of Mr. Dutt in this regard is unsound and is rejected. 11. If that be the position as contended by Mr. Dutt, there would not have been any necessity for the second proviso to Article 200. In my opinion, the contention of Mr. Dutt in this regard is unsound and is rejected. 11. THE last point that has been argued on behalf of the petitioners is that the goods which they produce are not yarns and as such they cannot be roped within the ambit of clause (bbb) (i). It is said that in order that a thread may come within the category of yarn it must be twisted or spun with other threads. In this connection, reliance has been placed on a decision of the Allahabad High Court in commissioner, Sales Tax, U.P., Lucknow v. Ballabh Das-25 S.T.C. 372. The question that has been considered in this decision is whether hand-spun yarn which underwent a process of twisting would be exempt from Sales Tax under a Government Notification dated march 31, 1956. It has been held that so long as yarn is hand-spun it would continue to enjoy the exemption granted by the said notification even it undergoes a process of twisting. 12. IN my opinion, no such proposition as contended on behalf of the petitioners has been laid down in that decision and, accordingly, I am unable to accept the same. It is for the taxing authorities to consider whether a particular article is yarn or not. All that I say is that the said decision does not lend support to the contention of mr. Dutt. No other point has been argued on behalf of the petitioners. In the result, both these Rules are discharged. There will be no order as to costs.